The underperformance of Nigeria, South Africa, Egypt and other African big economies is slowing down the continent’s economic growth, the World Bank has said.
The global bank also identified high inflation and a sharp deceleration of investment growth as other reasons African countries are recording slow growth.
The World Bank noted that in the face of dampened growth prospects and rising debt levels, African governments must sharpen their focus on macroeconomic stability, domestic revenue mobilisation, debt reduction and productive investments to reduce extreme poverty and boost shared prosperity in the medium to long-term period.
Relatedly, in the latest Africa’s Pulse, the World Bank projected that economic growth in Sub-Saharan Africa is expected to slow from 3.6 per cent in 2022 to 3.1 per cent this year.
The report stated: “Economic activity in South Africa is set to weaken further in 2023 (0.5 per cent annual growth) as the energy crisis deepens, while the growth recovery in Nigeria for 2023 (2.8 per cent) is still fragile as oil production remains subdued. The real gross domestic product (GDP) growth of the Western and Central Africa subregion is estimated to decline to 3.4 per cent in 2023 from 3.7 per cent in 2022, while that of Eastern and Southern Africa declines to three per cent in 2023 from 3.5 per cent in 2022.”
In his comments on the report, the World Bank Chief Economist for Africa, Andrew Dabalen, said: “Weak growth combined with debt vulnerabilities and dismal investment growth risks a lost decade in poverty reduction. Policymakers need to redouble efforts to curb inflation, boost domestic resource mobilisation and enact pro-growth reforms while continuing to help the poorest households cope with the rising costs of living.”
The report said debt distress risks remain high with 22 countries in the region at high risk of external debt distress or in debt distress as of December 2022.
It added: “Unfavorable global financial conditions have increased borrowing costs and debt service costs in Africa, diverting money from badly needed development investments and threatening macro-fiscal stability.
“Stubbornly high inflation and low investment growth continue to constrain African economies. While headline inflation appears to have peaked in the past year, inflation is set to remain high at 7.5 per cent for 2023, and above central bank target bands for most countries.
“Investment growth in Sub-Saharan Africa fell from 6.8 per cent in 2010-13 to 1.6 per cent in 2021, with a sharper slowdown in Eastern and Southern Africa than in Western and Central Africa.”
However, it noted that despite the identified challenges, many countries in the region are showing resilience amidst multiple crises. These include Kenya, Cote d’Ivoire, and the Democratic Republic of Congo (DRC), which grew at 5.2 per cent, 6.7 per cent, and 8.6 per cent respectively in 2022.
World Bank Senior Economist, James Cust said: “Rapid global decarbonization will bring significant economic opportunities to Africa. Metals and minerals will be needed in larger quantities for low carbon technologies like batteries – and with the right policies – could boost fiscal revenues, increase opportunities for regional value chains that create jobs, and accelerate economic transformation.”
The report further noted that in a time of energy transition and rising demand for metals and minerals, resource-rich governments have an opportunity to better leverage natural resources to finance their public programmes, diversify their economy, and expand energy access.
The report found that countries could potentially more than double the average revenues that they currently collect from natural resources, saying tapping the resources in the form of royalties and taxes while continuing to attract private sector investment requires the right kinds of policies, reforms and good governance.